Following four years of a political stalemate and a mediation process led by the Southern African Development Community (SADC), presidential and legislative elections took place at the end of 2013. Mr. Hery Rajaonarimampianina was elected president and took office on January 25, 2014. On April 11, Roger Kolo was appointed prime minister with the support of twelve political parties in the National Assembly. A new government, made of 31 ministers and state secretaries, has been formed.
Many international partners, who didn’t recognize the High Authority of Transition that had come to power in 2009 through unconstitutional means, have since expressed their willingness to normalize their relations with Madagascar, in light of the last election.
The GDP growth rate for 2013 is estimated at 2.4%, mainly pulled up by mining activities. The primary sector contracted due to natural disasters affecting the agricultural sector. The overall GDP growth rate remains insufficient to compensate for population growth, thus leading to a continuous decline of the GDP per capita.
Madagascar has been unsuccessful in reducing the number of people living in poverty and extreme poverty in the decade since 2001, when poverty was already at a very high level. Based on our revised estimates of the national poverty line and data from the national household surveys, about 75% of the population of Madagascar lived in poverty in 2010.
A stunning proportion of close to 60% of the population was considered extremely poor, based on the minimum food intake poverty estimation methodology—meaning that close to 13 million Malagasy people earn or live on resources whose value falls below the cost of about 2100 calories a day. Based on a cross-country comparison, as of 2010, Madagascar has become one of the poorest countries in the world, with close to 82.4% of the population living below $1.25 per day in 2010, and 92.8% below $2.0 per day.
Madagascar also struggles on the human development front: it ranked 151 out of 187 countries and territories in the 2013 Human Development Report. At this point, the country will not reach the UN Millennium Development Goals (MDG) by 2015. In particular, the MDGs for child mortality, primary education net enrollment and completion rates, and especially the eradication of extreme poverty, which in 2007 was deemed potentially achievable, can no longer be achieved.
Global perspectives for 2014 are favorable for countries in Sub-Saharan Africa, while climate shocks and political instability are the main risks for the region. Madagascar remains highly vulnerable to these risks, but if appropriate measures are taken, the country is poised to capitalize on this favorable environment to boost growth in 2014. The growth rate for 2014 is projected at 3%, a rate too low to make a dent in poverty.
On the external front, the overall balance of the balance of payments deteriorated in 2013. Indeed , the increase in export earnings from mining products was offset by the fall in foreign direct investment and the significant level of non- repatriation of export earnings. The deterioration has added pressure on international reserves, which fell by 26% in 2013.
The country continues to rank poorly on the ease of doing business (148/189 in Doing Business 2014).
Madagascar’s economy is very fragile and its capacity to absorb further shocks is at a bare minimum. Being an open economy, Madagascar is particularly vulnerable to developments in the euro zone, to which Madagascar is particularly exposed—through 80% of its tourism earnings, 50% of its exports of goods, 15% of its foreign direct investment (FDI), and other channels.
Madagascar is also highly vulnerable to natural disasters—including cyclones, droughts and flooding. It is estimated that one quarter of the population, representing five million people, currently live in zones at high risk of natural disasters. In 2008 cyclones caused economic losses equivalent to 4% of GDP.
Last Updated: May 12, 2014